Better working capital management will ensure that you are minimising the stock losses, and bad debts, while also maximising the supplier discounts.  This leads to better profit margins.

In addition to this, it is important to regularly critically review all expense items, to ensure that costs are minimised.  For example, if your sales levels are reduced, then does your insurance policy need to be at last year’s level?  When was the last time you shopped around and tendered for insurance, professional, legal and other fees?  Have you carried out a review of your staff’s phone and wireless bills to ensure they are all on the correct tariff and costs are minimised?  These are all simple tasks which need to be done as part of the annual budgeting process, but often don’t get done due to lack of time and internal resources.

Furthermore, it is important to establish staff productivity.  Simple measures can be put in place to measure their relative performance.  Each member of staff should also have a clearly defined role in the organisation, and planned career progression, if appropriate.  This may require specific training programs. While these might seem like a discretionary cost, they are far cheaper than hiring a replacement should the employee become de-motivated and leave.  By ensuring that each member of staff is properly valued, motivated and rewarded, profitability is improved.

For a number of small business owners, the financial accounts are only prepared once a year, and the audit is seen as a necessary evil. In many more cases, the business owners rarely understand what the accounts are actually telling them. Informed decisions can only be made based on regular financial and management informationIf the accounts are out of date, they may uncover an ongoing issue, and is more difficult to solve - or even worse, it may be too late to fix it. Also, if you do try to rectify it, you may not know until the next set of accounts if the action taken actually fixed the problem. 

Too many businesses are run in a re-active way.  Better management information, in an easy to understand format, allows you to stay on top of all aspects of the business, to resolve issues as they occur, and to stop them from escalating.  This in turn, frees up your time, and allows you to proactively focus on business development. 

In the current climate, management accounts should be prepared monthly, and carefully monitored against budget on an ongoing basis.  The assumptions underlying the budget should also be regularly reviewed to ensure that they are still valid, given all the uncertainty which is out there. Your accountant can help you with this.  Therefore, it’s time to love your accountant again, and get him earning those fees! 

At Connors Consulting, we can review your current systems and processes, and help you to make better business decisions, reduce your costs and improve profitability.  Call us today for a free initial consultation.